From: jutta.baer@basf-ag.de
Sent: Monday, February 17, 2003 6:01 AM
To: rule-comments@sec.gov
Subject: S7-02-03
Mr. Jonathan G. Katz
Secretary
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington D.C. 20549-0609
Re: Request for Comments on Proposed Rules Concerning Standards Relating to
Listed Company Audit Committees File No. S7-02-03
Dear Mr. Katz:
I am the legal counsel of BASF Aktiengesellschaft, a NYSE listed German
company, and in charge of correct compliance of the company with applicable
law. I am writing to express our views regarding the Commission's proposal to
adopt standards relating to listed company audit committees pursuant to Section
301 of the Sarbanes-Oxley Act of 2002 (SEC Release 34-47137) (the "Proposed
Rule").
The Sarbanes-Oxley Act establishes in Sec. 301 (3) (B) that a member of
the audit committee of an issuer, may not, other than in his capacity as a
member of the audit committee, the board of directors, or any other board
committee accept any consulting, advisory, or other compensatory fee from the
issuer. Sec. 301 (3) (C) gives the Commission the authority to exempt from
subparagraph (B) a particular relationship with respect to audit committee
members, as the Commission determines appropriate in light of the
circumstances.
The Commission has asked for comments on what appropriate exemptions
should be introduced in the Rules.
We believe that the Commission should exempt compensation under a
retirement or similar plan in which a former officer (in Germany: former member
of the Vorstand) or employee of the issuer participates. The Commission should
also exempt compensation to non-executive family members employed by the
issuer.
Our experience shows that the participation of retired officers or
employees can contribute significant value to supervisory boards and audit
committees. It would be contrary to the overall purpose of the Sarbanes-Oxley
Act ? improved corporate governance - to implement rules denying us and other
companies the benefit of choosing individuals with broad internal company
experience. We believe that compensation under a retirement or similar plan
does not impair an audit committee member's independence because such payments
are not linked to current or future services for the company by the audit
committee member. On the contrary, the payments largely derive from previous
contributions of the member to the company's retirement fund, and are therefore
based solely on past actions. A retired officer or employee receives these
payments regardless of his or her current function and activity.
The Commission should also exempt from the prohibition payments to family
members who are employed by the issuer in a non-executive position. Such
payments do not impair the independence of the audit committee member. The
possibility that an issuer could exert any influence on the audit committee
member through an employee in a non-executive position is extremely low. In
defining non-executive position, the Commission should bear in mind that under
German labor law, the term "leitende Angestellte" does not define an executive
position but includes many employees in the lower ranks of companies. As a
matter of fact in our company more than two thirds of the altogether about
1,400 "leitende Angestellte" are working at hierarchy level 5 (level 1 being
the "Vorstand").
We would like to thank the Commission for the opportunity to comment on
this Proposed Rule, and for considering our comments in this important matter.
Sincerely,
BASF Aktiengesellschaft
Legal Affairs, Taxes and Insurance
Eckart Sünner
_______________________________________________________
Dr. Eckart Sünner
President
BASF Aktiengesellschaft
Legal Affairs, Taxes and Insurance
67056 Ludwigshafen
Germany
Tel.: +49-621-60 49985
Fax: +49-621-60 20540
E-Mail: eckart.suenner@basf-ag.de
------------------------------------------------------------------------
BASF Aktiengesellschaft
ZR - D100
Eckart Suenner
Tel.: +49 621 60-49985